If you're a property investor, you're a small business owner

If you own property from which you receive rental income, you should be thinking of yourself a small business owner. Here's how to manage your investment efficiently so you can enjoy the biggest returns...


1. Know your numbers

Write a business plan. Look at the average market rents in the area by searching online or using the Tenancy Services website who have a market rent calculator (www.tenancy.gov.nz/rent-bond-and-bills/market-rent). Speak to a Just Rentals property manager to help you assess an appropriate market rate and to give you advice for estimating maintenance and repair costs. This will allow you to assess potential incomings against outgoings and look at your profit generation potential.


2. Think about tax

You must consider how the income from renting your property or from the capital gain of the property will impact your tax status. While you may be required to pay more tax, you can also deduct expenses for costs associated with your investment property. The IRD has some useful guides on tax for property investors at http://www.ird.govt.nz/property/property-rental/managing-a-rental-property.html.

Some things to remember for tax:

  • Rental income must be taxed in the same year you receive it.
  • There are some expenses related to maintaining and renting your property that you can claim for.
  • There is no GST on residential rental property. However, if you own an investment apartment with a management or service agreement in place, there may be GST implications to consider.
  • If you switch between renting out property and property dealing, you may be liable for tax when you sell.


3. Calculate the value of your time

Just as any small business owner would hire a professional to manage things such as accounts and tax payments, it's worth considering the benefits of hiring a property manager to take care of the day-to-day running of the property. Too many property investors underestimate the drain on their own time day-to-day management can be and they don't think about this as having a dollar value. Any time spent on a rental property is time away from your regular source of income, your family or your own home. Then you need to consider the potential for costs incurred due to a lack of legal knowledge or maintenance skills.